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Companies to set strict conditions in the law of income tax in stages

| Update:
Jan. 09, 2022, 3:42 p.m.

The new income tax bill is likely to ban cash transactions in some important areas such as the payment of wages and housing rent after its implementation.

But companies suggest slapping the ban in phases.

The law also keeps the much talked about withholding tax provisions (Articles 79 to 129) unchanged in the Income Tax Bill-2022 to replace the Income Tax Ordinance. -1984 after its adoption in parliament.

The Business Initiative Leading Development (BUILD) highlighted several provisions in the bill that require relaxation or phased implementation to help taxpayers cope with the changes before they are brought forward to policymakers.

BUILD is a unified business platform comprising Dhaka Chamber of Commerce and Industry, Metropolitan Chamber of Commerce and Industry, Dhaka, and Chittagong Chamber of Commerce and Industry.

The National Revenue Council, the BUILD said, considers withholding taxes, in most cases, to be a minimum or final tax, leading to the imposition of a double effective tax rate. to corporate taxpayers.

“Income tax and its adjustable withholding tax should be determined on the basis of the service profitability index or should be sectoral,” the BUILD said, suggesting a long-term plan for it.

Withholding tax is now determined based on the gross sale.

To collect withholding tax on export earnings, the BUILD suggested determining income tax on the basis of actual export earnings (recorded earnings) instead of export earnings or receipts received. .

He also suggested granting a total tax exemption to industrial companies benefiting from a tax holiday instead of 90 percent according to the sixth schedule of the bill.

The Income Tax Ordinance 1984 allows taxpayers to submit cash transactions up to Tk 20,000 for salary income, any amount of office rent, raw materials up to Tk 0.5 million. Tk and other payments up to Tk 50,000.

“Right now, a lot of business is done through cash transactions. The financial discipline of the informal sector which is linked to the formal section could be disrupted if the government made banking transactions 100% compulsory, ”explains BUILD.

He proposed first setting a threshold for mandatory banking transactions and gradually bringing transactions to 100%.

Speaking to the FE, a senior income tax official said that paying wages through the banking channel or mobile financial services (MFS) could be made mandatory in the income tax law. income in accordance with the project.

He said the measure would ensure transparency and that companies should gradually prepare for recorded transactions.

The BUILD also found no provision for the repatriation of foreign corporate income and the determination of multinational corporation income tax (MNC) in the law.

He therefore suggested incorporating a “pay where you win” provision for multinationals providing services and products around the world. A minimum tax should be imposed on them.

He also proposed to incorporate a provision to tax digital services.

He recommended incorporating guidelines to help companies wind up if they fail to maintain or continue operating by clarifying income tax procedures.

Other recommendations include the correct definition of export and deemed exportation in the law, the specification of electronic tax management on tax procedures, including the digitized process of hearing, appeal and tax settlement. .

It also recommended excluding taxpayers from the audit for the next three years after facing an audit in one year and using an automated risk-based audit system instead of random selection. existing files.

BUILD researcher (tax and fiscal affairs) Md Nooruzzaman said clear direction should be in the law on how to implement the automated tax system.

Taxpayers currently collect withholding tax or minimum tax in 36 heads which have remained unchanged in the bill which is a tax on income tax, he added.

Taxpayers must pay taxes double compared to the rate declared in the finance law because the reimbursement mechanism is not effective for withholding tax, he cited.

The researcher suggested focusing on expanding the tax net rather than imposing a tax burden on taxpayers and overhauling the existing tax structure to meet the government’s goals to achieve the prospect plan.

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